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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ________________________________

FORM 10-Q

________________________________

(Mark One)

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number 1-32167

________________________________

VAALCO Energy, Inc.

(Exact name of registrant as specified in its charter)

________________________________

Delaware

 

76-0274813

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

9800 Richmond Avenue

Suite 700

Houston, Texas

 

77042

(Address of principal executive offices)

 

(Zip code)

(713) 623-0801

(Registrant’s telephone number, including area code)

________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock

EGY

New York Stock Exchange

Common Stock

EGY

London Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

x

Smaller reporting company

Emerging growth company

x

¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).        Yes  ¨    No   x

As of October 26, 2021, there were outstanding 58,611,072 shares of common stock, $0.10 par value per share, of the registrant.  

 


Table of Contents

VAALCO ENERGY, INC. AND SUBSIDIARIES

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Condensed Consolidated Balance Sheets

September 30, 2021 and December 31, 2020

2

Condensed Consolidated Statements of Operations

Three and Nine Months Ended September 30, 2021 and 2020

3

Condensed Consolidated Statements of Shareholders’ Equity

Three and Nine Months Ended September 30, 2021 and 2020

4

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2021 and 2020

5

Notes to Condensed Consolidated Financial Statements

7

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

29

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

39

ITEM 4. CONTROLS AND PROCEDURES

40

PART II. OTHER INFORMATION

40

ITEM 1. LEGAL PROCEEDINGS

40

ITEM 1A. RISK FACTORS

40

ITEM 6. EXHIBITS

42

Unless the context otherwise indicates, references to “VAALCO,” “the Company”, “we,” “our,” or “us” in this Quarterly Report on Form 10-Q are references to VAALCO Energy, Inc., including its wholly-owned subsidiaries.


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Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

As of September 30, 2021

As of December 31, 2020

ASSETS

(in thousands)

Current assets:

Cash and cash equivalents

$

52,839

$

47,853

Restricted cash

81

86

Receivables:

Accounts with joint venture owners, net of allowance of $0.0 million in both periods presented

1,050

3,587

Foreign income taxes receivable

2,056

Other

86

4,331

Crude oil inventory

2,556

3,906

Prepayments and other

5,416

4,215

Total current assets

64,084

63,978

Crude oil and natural gas properties, equipment and other - successful efforts method, net

74,102

37,036

Other noncurrent assets:

Restricted cash

1,752

925

Value added tax and other receivables, net of allowance of $5.8 million and $2.3 million, respectively

5,670

4,271

Right of use operating lease assets

12,984

22,569

Deferred tax assets

24,211

Abandonment funding

22,281

12,453

Other long-term assets

1,176

Total assets

$

206,260

$

141,232

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

8,433

$

16,690

Accounts with joint venture owners

2,325

4,945

Accrued liabilities and other

39,857

17,184

Operating lease liabilities - current portion

12,671

12,890

Foreign income taxes payable

860

Current liabilities - discontinued operations

7

7

Total current liabilities

63,293

52,576

Asset retirement obligations

33,077

17,334

Operating lease liabilities - net of current portion

312

9,671

Other long-term liabilities

193

Total liabilities

96,682

79,774

Commitments and contingencies (Note 10)

 

 

Shareholders’ equity:

Preferred stock, $25 par value; 500,000 shares authorized, none issued

Common stock, $0.10 par value; 100,000,000 shares authorized, 69,528,100 and 67,897,530 shares issued, 58,588,777 and 57,531,154 shares outstanding, respectively

6,953

6,790

Additional paid-in capital

76,346

74,437

Less treasury stock, 10,939,323 and 10,366,376 shares, respectively, at cost

(43,847)

(42,421)

Retained earnings

70,126

22,652

Total shareholders' equity

109,578

61,458

Total liabilities and shareholders' equity

$

206,260

$

141,232

See notes to condensed consolidated financial statements.

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Table of Contents

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

(in thousands, except per share amounts)

Revenues:

Crude oil and natural gas sales

$

55,899

$

18,256

$

142,696

$

54,619

Operating costs and expenses:

Production expense

25,208

8,984

57,760

30,859

Exploration expense

479

16

1,286

16

Depreciation, depletion and amortization

6,970

2,212

16,928

8,116

Impairment of proved crude oil and natural gas properties

30,625

General and administrative expense

2,940

2,178

12,221

5,951

Bad debt expense and other

318

151

814

1,140

Total operating costs and expenses

35,915

13,541

89,009

76,707

Other operating income (expense), net

46

(37)

(440)

(883)

Operating income (loss)

20,030

4,678

53,247

(22,971)

Other income (expense):

Derivative instruments gain (loss), net

(5,147)

(21,070)

6,583

Interest income, net

3

23

9

150

Other, net

(328)

147

4,088

163

Total other income (expense), net

(5,472)

170

(16,973)

6,896

Income (loss) from continuing operations before income taxes

14,558

4,848

36,274

(16,075)

Income tax expense (benefit)

(17,183)

(2,759)

(11,272)

28,470

Income (loss) from continuing operations

31,741

7,607

47,546

(44,545)

Income (loss) from discontinued operations, net of tax

(20)

11

(72)

(41)

Net income (loss)

$

31,721

$

7,618

$

47,474

$

(44,586)

Basic net income (loss) per share:

Income (loss) from continuing operations

$

0.53

$

0.13

$

0.81

$

(0.77)

Loss from discontinued operations, net of tax

0.00

0.00

0.00

0.00

Net income (loss) per share

$

0.53

$

0.13

$

0.81

$

(0.77)

Basic weighted average shares outstanding

58,586

57,456

58,102

57,628

Diluted net income (loss) per share:

Income (loss) from continuing operations

$

0.53

$

0.13

$

0.80

$

(0.77)

Loss from discontinued operations, net of tax

0.00

0.00

0.00

0.00

Net income (loss) per share

$

0.53

$

0.13

$

0.80

$

(0.77)

Diluted weighted average shares outstanding

58,916

57,741

58,654

57,628

See notes to condensed consolidated financial statements.

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Table of Contents

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

Common Shares Issued

Treasury Shares

Common Stock

Additional Paid-In Capital

Treasury Stock

Retained Earnings

Total

(in thousands)

Balance at January 1, 2021

67,897

(10,366)

$

6,790

$

74,437

$

(42,421)

$

22,652

$

61,458

Shares issued - stock-based compensation

431

(155)

43

304

347

Stock-based compensation expense

323

323

Treasury stock

(403)

(403)

Net income

9,869

9,869

Balance at March 31, 2021

68,328

(10,521)

6,833

75,064

(42,824)

32,521

71,594

Shares issued - stock-based compensation

1,092

(314)

109

597

706

Stock-based compensation expense

117

117

Treasury stock

(765)

(765)

Net income

5,884

5,884

Balance at June 30, 2021

69,420

(10,835)

6,942

75,778

(43,589)

38,405

77,536

Shares issued - stock-based compensation

108

(104)

11

241

252

Stock-based compensation expense

327

327

Treasury stock

(258)

(258)

Net income

31,721

31,721

Balance at September 30, 2021

69,528

(10,939)

$

6,953

$

76,346

$

(43,847)

$

70,126

$

109,578

Common Shares Issued

Treasury Shares

Common Stock

Additional Paid-In Capital

Treasury Stock

Retained Earnings

Total

(in thousands)

Balance at January 1, 2020

67,674

(9,649)

$

6,767

$